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Richard Rider

Rise of single parent homes the prime factor in modest household income growth

Here’s four basic facts that almost no one knows about America:

1. Contrary to what our progressive pundits tell us, since 1967, real (inflation adjusted) household incomes HAVE risen — 43.3%.

2.  During that time frame, PER PERSON real household income has risen much faster — 86.5%.

3.  Probably the biggest single factor keeping household income from being higher has been the rise of single parent households.  The median household numbers have dropped from 3.28 people to 2.52 over this period.  It dropped especially fast from 1967 to 1993 when our welfare state exploded, slowing only when tepid welfare reforms were initiated by the GOP and President Clinton.
In essence, our benevolent government has paid people not to get married.  It worked!

4.  Since 1967 — like all groups — the black middle class has shrunk.  But not the way people think.  It’s a GOOD thing!  That’s because there’s been a tremendous increase in the percent of blacks who now are in the “high-income” group — from 9.1% to 29.4%.   And even though there has been a major drop in the percent of blacks in the low-income group — from 44.5% to 28.7%.

For the details, review the excellent graphic presentation below — using the latest figures just released by the U.S. Census Bureau. Printed with the permission of the author, Professor Mark Perry.

More charts and commentary on last week’s Census Bureau report on income

The Census Bureau released its annual report last week on “Income and Poverty in the United States: 2019” with lots of new, updated data on household and family incomes, household demographics, and poverty statistics through 2019. I posted two reports on the new Census Bureau report last week on CD here and here. Below are some additional charts with commentary based on the new household income data through 2019.

1. Median Household Income, Average Household Size, and Income per Householder. The chart above shows: a) the percentage increase in median US household income (in constant 2019 dollars) since 1967, b) the average household size in each year from 1967 to 2019 and c) the percentage increase in median household income per household member since 1967.

The size of the average US household has declined steadily over time and fell to an all-time low last year of 2.52 members. That’s a decline of 0.76 household members since 1967 when the average US household size was 3.28 persons. On a percentage basis, that’s more than a 23% decline in the size of the average US household over the last 50 years. Obviously the shrinking size of the average US household distorts a comparison of median household incomes over time in different years that have different average numbers of household members. In economic terms, the ceteris paribus assumption of holding everything constant is violated since household size is not constant over time, but decreasing.

We can adjust for the declining average household size by calculating the real median household income per household member, which almost doubled from $14,615 in 1967 to $27,263 last year. Over that same period, inflation-adjusted median household income increased by 43.3% from $47,938 in 1967 to $68,703 last year. That’s quite a difference — the percent increase in median household income per household member since 1967 of 86.6% is almost exactly twice the percent increase in real median household income over the last half-century of 43.3%.

Bottom Line: Because the average size of a US household has steadily declined over time and reached an all-time low in 2019 of 2.52, the increase in real median household income since 1967 of 43.4% significantly understates the increase in real median household income per household member of 86.6% by a factor of two over the last half-century. The next time you hear politicians’ or the media’s false narratives about economic gloom and doom, declining living standards, and average Americans struggling to survive on stagnant wages, think about the fact that the real median household income per US household member has doubled over the last 50 years.

2. Annual Increases in Median Household Income. The top chart above shows the annual percentage increases in real median US household income from 1968 to 2019. The 6.8% gain in American’s median household income last year to $68,703 was the largest annual increase on record based on Census Bureau data starting in 1967. It was also about 10 times the average annual increase of only 0.72% over the last 52 years. The average annual increase of 3.02% during the 2017-2019 period was the second-largest three-year increase since 1968.

The bottom chart above shows the annual gains in real median income for black households in the US from 1968 to 2019. The nearly 8% increase last year was the largest gain on record for black median household income and was almost nine times the average annual increase of 0.90% over the last half-century.

Keep those remarkable household income gains in mind the next time you hear from politicians or the media about America’s economic gloom and doom, stagnating incomes, rising income inequality, stagnating wages, today’s young people being worse off economically than their parents…..especially for blacks, women, Hispanics, etc.

3. Income Shares for Black Households. The chart above displays the percent shares of black households by total money income for three income categories annually from 1967 to 2019: a) low-income black households earning $25,000 or less, b) middle-income black households earning between $25,000 and $75,000 and c) high-income black households earning $75,000 or more (all in constant inflation-adjusted 2019 dollars).

As I explained last week in reference to the data for all US households, the “black middle-class is disappearing” as we hear all the time, but it’s because middle-income black households in the US are gradually moving up to higher-income groups, and not down into lower-income groups as the mainstream media and leftists (but I repeat myself) would have you believe. In 1967, only 9.1% of black households in the US earned $75,000 or more (in 2019 dollars). In 2019, 29.4% of black households had moved up into that high-income category, a new record high. In other words, over the last half-century, the share of black households earning incomes of $75,000 or more (in 2019 dollars) has more than tripled as that share increased by 3.2 times over the last half-century! At the same time, the share of middle-income black households earning $25,000 to $75,000 (in 2019 dollars) has decreased over time, from 46.4% of black households in 1967 to 41.4% in 2019. Likewise, the share of low-income black households earning $25,000 or less (in 2019 dollars) has decreased from 44.5% of blac households in 1967 to only 28.7% of black households last year, a new record low.

In 1967, there were about five times as many low-income black households (44.5%) as high-income households (9.1%) but by 1993, there were only 2 times as many low-income black households as high-income households, Remarkably last year, due to ongoing increases in prosperity and economic gains for all Americans, there were more high-income black households (29.4%) than low-income households (28.7%) for the first time. Keep those noteworthy, significant income gains and rising prosperity for black Americans the next time you hear about how blacks in America are suffering economically under the Trump administration in a country infected with systemic racism, white privilege, etc.